Calculating costs for a bread factory
You are the owner of a small bread factory and are thinking
of lowering costs and expanding. Your small-business advisors suggested that
you first review your operations and make some technological changes. Complete
the following:
Explain what a technological change is and how you can use
it to lower your costs.
The next thing that your small business advisors asked you
to do was to break down your costs and see what you can reduce.
Develop a table that you believe shows the explicit fixed
costs of the bread factory and the total amount of the costs.
Describe your variable costs.
Because you are not an expert yet on analyzing costs and
optimal production levels, you decide to do a very simple analysis of your
short-run fixed and variable costs if you expand. You decide that your only
fixed cost will be the ovens and the variable costs will be the workers.
Quantity of Workers
Quantity of Ovens
Quantity of Loaves of Bread Produced
Cost of Ovens
Cost of Workers Per Week
0
2
0
500
0
1
2
50
450
2
2
125
3
2
210
4
2
300
5
2
410
6
2
550
7
2
625
8
2
660
9
2
700
10
2
730
Instructions
Calculate the total cost and the average total cost, and add
it to the table
Calculate the marginal product of labor, and add it to the
table.
Calculate the average product of labor, and add it to the
table.
Although there seems to be a great demand for your bread,
why would productivity decline when you hire more labor in the short run?
What are your marginal costs?
At what point do your marginal costs and your total costs
intersect?
Calculate your average total costs, your average fixed
costs, and your average variable costs.
What happens to your average variable costs as your output
goes up? Why is that?
How would expanding the business affect the economies of
scale? When would you have constant return to scale and diseconomies of scale?
Provide examples.
Where is the optimal level of production and the optimal
level of prices in the short run?
Please submit your assignment.
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